Las Vegas Sands Corp.: A High-Risk, High-Return Strategy?
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Case Details:
Case Code : BSTR273
Case Length : 15 pages
Period : 1988-2007
Pub Date : 2008
Teaching Note :Not Available
Organization : -
Industry : Entertainment
Countries : USA, Macau SAR
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Introduction Contd...
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However, analysts were not too sure if the huge investments
would pay off, saying that there were several things that could wrong. To start
with, they were not comfortable with the company building so many projects in
one city.
The fact that Beijing's visa rules vis-à-vis Macau would dictate the number of
visitors to the island made it highly risky, said analysts. A major part of the
funding for the mega-projects came from high-interest debt, so the company was
debt-heavy. Also, there were fears of a global slowdown following the US
sub-prime crisis. If these fears were to come true, LVSC might see a drop in
customer numbers, affecting its financial health.
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Analysts also pointed out that
the company depended almost entirely on the resourcefulness of Adelson - who was
in his mid-70s - for all its strategic decisions.
Background Note
Las Vegas Sands Corp.'s first casino property, The Venetian, was constructed by
demolishing the historic Sands Hotel and Casino (SHC). The SHC, founded by Jake
Freedman, had opened for business on December 15, 1952. Initially, the hotel
complex had only a few hundred rooms. After the death of Freedman in 1958, Jack
Entratter and Carl Cohen became President and Vice-President of the hotel,
respectively. They added a 15-story tower which went on to become a well-known
landmark of Las Vegas (Refer Exhibit I for a photo of the old Sands Hotel and
Casino).
The SHC became the hub of entertainment in Las Vegas, with Frank Sinatra, Dean
Martin, and Sammy Davis Jr. performing regularly at the casino. Several
celebrities including US presidents, Harry S. Truman and John F. Kennedy, were
reported to have stayed at the SHC. In 1967, the casino-hotel came to be owned
by Howard Hughes5, who in turn sold it to
Dallas-based Inns of the Americas, Inc in 1981...
Excerpts >>
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